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People stood on higher ground, watching their houses collapse under the force of a wall of water that rushed through their crowded neighborhood in Jakarta. Five days later, as the death toll approached 100 after the bursting of a 75-year-old dam on March 27, rescue workers were still searching through the mud where dozens more bodies are feared to have been buried. And the blame game over who or what was responsible for the collapse continued.

Some locals reported having seen cracks in the banks of the dirt dam, built in the 1930s by the Dutch colonial government. "Indonesia's problem with spending money on maintenance has taken its toll," says Tom Shreve, president director of Glendale Partners, an infrastructure consulting firm. "The city has a lot to do in maintaining and improving infrastructure." The Indonesian government, which has responded to the disaster by sending police and soldiers to help clear the area, has acknowledged that more needs to be done to maintain and improve the country's creaky infrastructure. "This shows that we need to monitor all of these reservoirs and make sure they are still retaining their function," says Andi Mallarangeng, a spokesman for Indonesia's President Susilo Bambang Yudhoyono. After the collapse of Suharto's regime that ruled Indonesia for 32 years, he says, "much infrastructure was neglected and that is why the President has made improving infrastructure one of his top priorities." (See pictures of the dam's collapse.

In February, the government announced it would spend some $7 billion on various projects as part of an overall stimulus package. Since taking office in 2004, Yudhoyono has held two major "infrastructure summits" offering close to $38 billion dollars' worth of projects to private investors, though few have had any takers. Jakarta's business community cites a range of problems and obstacles that are keeping investors on the sidelines while funding remains sorely needed for the building of new ports, power plants and roads across this huge nation. "Lots of projects were showcased but very few have been realized because of classic issues like labor laws and the overall investment climate," explains Sandiaga Uno, CEO of Saratoga Capital, a venture capital firm. "Very basic issues like the bureaucracy and land availability have stifled infrastructure efforts."

Billions of dollars of investment will be needed not only to help keep the country's economy growing but to prevent other infrastructure-related accidents like train derailment or boats capsizing  both of which occur with alarming frequency. More than 200 are believed to have died in January when an overloaded ferry capsized in bad weather off the coast of Sulawesi. While natural catastrophes like flooding and landslides take a human toll every year in Indonesia, many say manmade disasters like the March 27 dam collapse can be prevented. "The country is taking the right steps but the speed will depend on changes in the regulatory framework," predicts Adnan Tan, head of sales and trading at CLSA Indonesia. "It is sometimes hard to get things through parliament because of competing interests."

Infrastructure problems are even worse in eastern Indonesia, the least developed part of the country. The governor of Gorontalo, on the eastern island of Sulawesi, says most foreign investment is going to agriculture and fisheries  not power plants and ports  because poor infrastructure made it difficult for the province to attract funding in those areas. "We have to give [foreign investors] more priority when they invest outside Java because the infrastructure is not ready," he recently told a group of foreign journalists.

Yet given that it takes years for companies to see a return on their investments in major infrastructure projects, Jakarta will have to act quickly and create an investment climate that makes the country more attractive than others in the region, particularly during these times of crisis. "Select projects will get interest from investors in Japan and Taiwan but it won't be as easy as when liquidity was more available so incentives are needed," adds Uno, one of the country's most successful young businessmen. "It is high time for the government to take the lead."